SCALE ECONOMIES IN SMALL ENTREPRENEURIAL FIRMS*
| Published date | 01 February 1992 |
| Date | 01 February 1992 |
| Author | Gavin C. Reid |
| DOI | http://doi.org/10.1111/j.1467-9485.1992.tb00603.x |
.Suirrirh
Journal
of
Pokriml
Economy.
VoI
39.
No.
I.
February I992
I992
Scoitish Economic Society
SCALE ECONOMIES IN SMALL
ENTREPRENEURIAL FIRMS*
GAVIN
C.
REID*
University
of
St.
Andrews
I
INTRODUCTION
For
a sample
of
small, entrepreneurial firms, subjective cost curve estimates are
obtained by field work methods using an administered questionnaire and ‘show
cards’. They indicate the prevalence
of
static, short-run increasing returns up
to maximal physical output for a wide range
of
products in manufactures,
services, construction and transport. The dynamic scale effect, measured over
a three year period is less clear, and suggests
a
slight average tendency
to
dynamic increasing returns. Long-run equilibrium, as identified by
unconstrained cross-section production function estimates, appears
to
be
characterised by decreasing returns
to
scale.
BACKGROUND
In
a much-debated study, Eiteman and Guthrie (1952) were bold enough
to
suggest that one way
of
finding out about the cost curves
of
businesses was
simply
to
ask businessmen. They used a postal questionnaire sent
to
1000
manufacturing enterprises in the
USA,
and got responses from
366
(i.e.
36.6%)
of
them. The enterprises employed between
500
and 5,000 employees and
typically,
it
was claimed, a senior executive (eg. President, Vice-president,
Treasurer
or
Secretary) replied, rather than an accountant
or
production
manager. Pictures
of
eight possible unit cost curves were sent, with a single
sentence of explanation attached to each. By
far
the most commonly cited cost
*
This research has been supported by grants from the Scottish Economic Society, the
Nuffield Foundation, the Leverhulme Trust and the David Hume Institute. My co-workers in
the field work were Lowell Jacobsen, Anne-Theresa Lawrie and Jacqueline Campbell.
Christopher Corrie provided research assistance during my tenureship
of
a Leverhulme Trust
Research Fellowship in 1989-90. Thanks are due to Cliff Pratten, Trinity Hall, Cambridge,
without in any way implicating him,
for
advice and encouragement on the project, particularly
in
regard
to
the design
of
the 1988 re-interview questionnaire.
1
remain responsible
for
any
errors of omission or commission that this article may contain.
Date
of
receipt
of
final manuscript: 13th November 1990.
39
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